 Hiding and herding in market entryFrancis Bloch, Simona Fabrizi and Steffen Lippert Journal of Economic Theory, 2022, vol. 206, issue C Abstract: We model entry decisions of rival firms into a new market with uncertain common entry costs, potential product market competition, and experimentation. We show that a separating equilibrium, where firms enter only when they learn that the cost is low and are immediately followed by their rival, always exists. We also show the existence of pooling equilibria. In these equilibria, uninformed firms coordinate to enter at specific entry dates with positive probability and firms that learn that the cost is low before those dates strategically delay their entry to hide under the cover of the uninformed firms. We show that these pooling equilibria, which do not trigger immediate entry, are more likely to exist with an early than a late entry date, that they are unique given a fixed entry date, and that equilibrium payoffs are nonmonotonic in the entry date. We also study recurrent-entry pooling equilibria with multiple entry dates for uninformed firms. Keywords: Entry; Uncertain and irreversible costs; Common values; Hiding and herding; Experimentation; Market competition (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:206:y:2022:i:c:s0022053122001582 DOI: 10.1016/j.jet.2022.105568 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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